Hereby I will prove how the realty boomers arguments are false.

What are the boomers arguments?

1.) Buy today, houses always increase in value in the long run.
WRONG. House prices cannot increase more than incomes in the long run. This is obvious if you think about it. If house prices go up more than people can afford to pay, buying stops, like it has stopped now.
Even Warren Buffett have pointed out that houses don't increase in intrinsic value. Unless there's a bubble or a crash, house prices simply reflect current salaries and interest rates. If a house is 100 years old, it's value in sheltering you is exactly the same as it was 100 years ago. Then came the maintenance as the house didn't renovate itself. It also has taxes, and insurance - costs that always increase and never go away. The price of the house went up about as much as salaries went up.
To put this is simple perspective, vegetable were costing Rs.5-6/kg when 5 digit salary was a rarity.
Today, the prices have gone up by about 4 times but so have the salaries. So, sounds very much like the reasoning people use now when they talk about how much their father's house appreciated "in the long run" without considering that salaries rose a proportional amount.

2.) Renting is just wastage of money.
WRONG. As said before renting is now much cheaper per month than owning. If you don't rent, you either:

* Have a mortgage, in which case you are throwing away money on interest, tax, insurance, maintenance, costs that increase forever.
* Own outright, in which case you are throwing away the extra income you could get by converting your house to cash, investing in bonds, and renting a similar place to live for much less money. This extra income is sufficient for emergency expenses,retirement etc.

Either way, owners lose much more money every month than renters and that's assuming prices don't correct to very high level & everything is smooth in the economy.

3.) As a renter, you won't have any money left as you will spend them on vacations,cars & hence won't have equity/savings etc.
WRONG. Equity is just money. Renters are actually in a better position to build equity/savings through investing in anything but housing. Renters can get rich much faster than owners, just by investing in conservative stocks & bonds.

* Owners are losing every month by paying much more for interest than they would pay for rent. The tax deduction does not come close to making owing competitive with renting.
* Owners must pay taxes simply to own a house. That is not true of stocks, bonds, or any other asset that can build equity/savings. Only houses are such a guaranteed drain on cash.
* Owners must insure a house, but not most other investments.
* Owners must pay to repair a house, but not a stock or a bond.
* Owners lose their money as house prices reduce. The EMI's remain constant in spite of reduction in rates. At the end of loan tenure, they would have paid almost twice than that of current renters who will buy at logical rates. Keep interest rates in mind. Most of the EMI is not principal amount but interest.

4.) There are great tax advantages to owning a house.
WRONG. Many people believe you can just reduce your income tax by the amount you pay in interest, but they are wrong. Buyers may not deduct interest from income tax; they deduct interest from taxable income. And even then, the tax advantage is not significant compared to the large monthly loss from owning.

If you don't own a house but want to live in one, your choice is to rent a house or rent money to buy a house. To rent money is to take out a loan. A mortgage is a money-rental agreement. House renters take no risk at all, but money-renting owners take on the huge risk of falling house prices, as well as all the costs of repairs, insurance, property taxes, etc.

5.) RE is based on local factors, it's not a national phenomenon. RE of Delhi-NCR,Bangalore & rest of the cities has nothing to do with Pune RE.
WRONG. Lending rates remain the same throughout the country. ALL loans are harder to get. This will drive prices down everywhere.

6.) A rental house provides good income. So, you can rent if you have purchased as investment.
WRONG. Rental houses provide very poor income in hyped areas and certainly cannot cover mortgage payments. Remember there is almost 300% difference between EMIs & rent for the same house.

It's pointless to do the work of being a landlord if you can make more money with no risk, no work, and no state income tax by investing in assured good returns bond.

7.) If owning is a loss in monthly cash flow, but appreciation will make up for it.
WRONG. Appreciation is negative. Prices are going down. It only adds to the injury of already high EMI's.

8.) As soon as prices drop a little, the number of buyers on the sidelines willing to jump back in increases.
WRONG. There are very few buyers left, and those who do want to buy will be limited by increasing difficulty of borrowing now that many house owners are near bankrupt as they don't save anything at the end of the month due to high EMI's.
No one has to buy, but there will be more and more people who have no choice but to sell as their payments rise. That will keep driving prices downward for a long time.

9.) House prices never fall atleast in Pune.
WRONG. If you see the RE scenario of 1996, prices crashed by 50% & took a whole 7+ years to recover.
Exact 1996 scenario may not be there today but strong correction is inevitable across the city.

10.) House prices don't fall to zero like stock prices, so it's safer to invest in real estate.
WRONG. House prices won't be zero, but the equity or the principal amount you paid can be zero or even negative. What you will pay as EMIs later in actual terms is not for the principal amount but only the interest as house prices dip. So, you will be only serving the bank.

11.) Prices will soften gradually, won't crash immediately.
WRONG. Prices are falling off a cliff. No one knows exactly what will happen, but it looks like prices will continue to fall for long time. These are just more manipulation of buyer emotions, to get them to buy even while prices are falling.

12.) The bubble prices were driven by supply and demand alone.
WRONG. Prices were driven by low interest rates and risky loans & good returns for investors in initial phases of boom in 2004-05.
Prices went up, interest rates went up & buyers savings went down. So prices are violating the most basic assumptions about supply and demand.

13.) There is lack of land.
WRONG. Ample of land is available & continue to be even in future in Pune. Sales volume are down. Even in Japan (small country with less land), prices went down. Current prices here are the same as that of 23 years ago. If we really had a housing shortage, there would not be so many vacant rentals.

14.) If you don't own, you'll live in a cheap neighborhood later.
WRONG. For the any given monthly payment, you can rent a much better house than you can buy. Renters live better, not worse. There are downsides to renting, such as being told to move at the end of your lease, or having your rent raised, but since there are thousands of vacant rentals, you can take your pick and be quite happy renting during the crash. There are similar but worse problems for owners anyway, such as being fired and losing your house, or having your interest rate and property taxes adjust upward. Remember, property taxes are forever.

15.) There's always someone predicting a real estate crash.
TRUE, yet irrelevant. There are very real crashes every decade or so. Even a broken clock is right twice a day.

16.) Local incomes justify the high prices.
WRONG. The mortgage should be more than your 3 years earning. It is much higher today. Most are already in danger/red zone.

17.) You have to live somewhere.
CORRECT. But that doesn't mean you should waste your life savings on a bad investment. You can live in a better house for much less money by renting during the down slide in RE.

18.) It's not a house, it's a home.
WRONG. Wherever one lives in it is home, be it apartment, condo, bungalow , mansion or house. Calling a house a "home" is a manipulation of your emotions for profit.

19.) If you don't buy now, you'll never get another chance.
WRONG. History proves otherwise.
Here's a beautiful quote from a analyst:-
"The real issue isn't whether you will be stuck being a renter all your life, she says. Its whether you'll get so scared about being shut out that you'll buy at the market's peak and be stuck in a property you can't afford or sell."

20.) It would take major economic recession or a major earthquake that wipes out this area in order for the price to fall by over 50%.
WRONG. Even today, if the prices fall by 50%, there will still be very few people who can buy at this levels due to uncertainty in jobs & most importantly high EMIs. Also, look at the rental rates for equivalent houses. Which loss per month is larger? EMI or rent?

contd....
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  • Originally Posted by realacres
    Man, the fact is this scam is so big that it can't be washed out either. Even today, the parliament was adjourned as opposition parties demanded JPC. In CWG, a new company Picco-Dipali:D has come up where Kallu & Co. gave them INR 230 Cr & the fact is such co. doesn't even exists:bab (34):.

    Do you think Congress will get loose here? Infact with my interaction with some politicos, all of them said that this is one of the best time to beat UPA2 so won't let it go. Already there are cracks in UPA after Mamta Banerjee of TMC too agreed with opposition demand for JPC, though her strategy is to get more assembly seats in WB by using this tool!!

    I am damn sure that these cos won't get away, in worst case they will have to shell out another few thousand crores as penalty perhaps. Add to it that existing major telecom players are lobbying hard as well to eliminate these new crap cos who have captured some share + offering less prices leading to reduction in bottom-line of established telcos. The thing is TRAI going against these new telcos clearly shows that COAI & AUSPI aren't lobbying for them:bab (34):.

    CWG, 2G, Lavasa, Aadarsh, NREGS, Sugar, IPL.....how many scams you want & note than 2G scam is biggest in the history of India till date & is bigger than all scams mentioned above put together.


    And what will JPC will do in this case?? if this first time opposition is demanding for JPC, in past as well we have seen JPCs, have you seen anybody gone to Jail?? (Just read this (http://indiatoday.intoday.in/site/AskPrabhuStory?Qid=120788)...

    Yes 2G scam is Biggest, not in terms of money, but in terms on involvement, right from Congress, DMK, Barkha,vir sanghvi, Ratan TATA, Mukesh bhai..and many more involved (Nira radia tapes)..so do you think is it possible to take action on these all ppls...(you never know if anybody from opposition BJP, left might also involved in it)...so, you will see this hulla-gulla for couples of weeks & then thing will get to normal...

    In a country, where you can not hang a terrorist (kasab), who killed hundreds of ppls & its recorded on Video cameras, then how come you get these ppls caught ONLY trhu telephonic conversations...

    Mark my words "NOTING GONNA Happen"...Kaddu katega aur sako batega..Congress will through some haddi to left & opposition & then all will lick that haddi together & you & me will see it in despair...
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  • Originally Posted by ash7979
    And what will JPC will do in this case?? if this first time opposition is demanding for JPC, in past as well we have seen JPCs, have you seen anybody gone to Jail?? (Just read this (http://indiatoday.intoday.in/site/AskPrabhuStory?Qid=120788)...

    Yes 2G scam is Biggest, not in terms of money, but in terms on involvement, right from Congress, DMK, Barkha,vir sanghvi, Ratan TATA, Mukesh bhai..and many more involved (Nira radia tapes)..so do you think is it possible to take action on these all ppls...(you never know if anybody from opposition BJP, left might also involved in it)...so, you will see this hulla-gulla for couples of weeks & then thing will get to normal...

    In a country, where you can not hang a terrorist (kasab), who killed hundreds of ppls & its recorded on Video cameras, then how come you get these ppls caught ONLY trhu telephonic conversations...

    Mark my words "NOTING GONNA Happen"...Kaddu katega aur sako batega..Congress will through some haddi to left & opposition & then all will lick that haddi together & you & me will see it in despair...


    Ashish.. you may be right... at the end nothing will happen but at least, people will be aware of what politicians can do (and always do)... this is an expensive lesson to the mango man and we can hope that at least, some fraction will learn from their voting mistakes.

    This also has potential for increased RTI from many sectors in the society and hence the local MPs / nagar sevaks may not remain that casual .. our society is so bottoming out that every bit will help.

    I think at this point, we should be happy that at least these scams are coming out to the public eye...
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  • Originally Posted by ash7979
    "So*ftware companies are setting up facilities in Dehradun."

    Do you have any idea/names of the companies setting up their offices in Dehradun..I would really love to work in deharadun (If I can get job there:D)



    Apply to Disney, Florida, you get $$ + Miami beach + Bahamas + Key west + Disney parks. how about that?:D:D:D
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  • Originally Posted by hitmady
    Then I am sure Pune-MP, Kallu is responsible for high RE-rates :D
    RE rise in Pune coincides with his CWG booty. He should be treated like Swin-flu disease and externed from Pune.


    And what about bobda Pawar?:D
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  • Originally Posted by heretic

    1] Pune is very expensive, especially the RE sector. There is NOTHING special about Mah that RE prices should be so high.
    2] There are better places to live in, where one can save a lot on rental / house purchase if one has the initiative to come out of his tent and look around :D

    If this is the case.....if there is nothing special what r u doing here??

    Something must be there special....

    Offcouse rates r very very high ...but no point in comparing that with Dehradun

    If this is the case.....if there is nothing special what r u doing here??

    Something must be there special....

    Offcouse rates r very very high ...but no point in comparing that with Dehradun

    If this is the case.....if there is nothing special what r u doing here??

    Something must be there special....

    Offcouse rates r very very high ...but no point in comparing that with Dehradun

    If this is the case.....if there is nothing special what r u doing here??

    Something must be there special....

    Offcouse rates r very very high ...but no point in comparing that with Dehradun
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  • Originally Posted by kothrud_pune
    If this is the case.....if there is nothing special what r u doing here??

    Something must be there special....

    Offcouse rates r very very high ...but no point in comparing that with Dehradun


    Comparisons are a matter of personal viewpoint.

    And who says I'm IN Pune? I said I was born & brought up in Pune, transferred to Dehra bet Jan - May 2010, came back to tie up some loose ends, and came back here after Diwali. I'm perfectly at peace here.

    And the reason that led me to search for a better town to live in is the mess that Pune has become due to Kallu G, Pawar G [Note: 'G' does not denote respect; it is short-form for 'Goonda' :D :D
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  • Originally Posted by heretic
    Comparisons are a matter of personal viewpoint.

    And who says I'm IN Pune? I said I was born & brought up in Pune, transferred to Dehra bet Jan - May 2010, came back to tie up some loose ends, and came back here after Diwali. I'm perfectly at peace here.

    And the reason that led me to search for a better town to live in is the mess that Pune has become due to Kallu G, Pawar G
    G' does not denote respect; it is short-form for 'Goonda' :D :D

    while its true that real estate rates in pune surpasses rates of many worldclass cities, dehradoon and pune are incomparable. each city has its own problems, i am sure some residents of dehardoon will find pune as better than their own city. in short gharki murgi daal barabar:bab (6):. BTW whats psft rate in deharadoon? How safe it is?

    while its true that real estate rates in pune surpasses rates of many worldclass cities, dehradoon and pune are incomparable. each city has its own problems, i am sure some residents of dehardoon will find pune as better than their own city. in short gharki murgi daal barabar:bab (6):. BTW whats psft rate in deharadoon? How safe it is?
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  • Credibility Is Lost

    Originally Posted by ash7979
    And what will JPC will do in this case?? if this first time opposition is demanding for JPC, in past as well we have seen JPCs, have you seen anybody gone to Jail?? (Just read this (http://indiatoday.intoday.in/site/AskPrabhuStory?Qid=120788)...

    Yes 2G scam is Biggest, not in terms of money, but in terms on involvement, right from Congress, DMK, Barkha,vir sanghvi, Ratan TATA, Mukesh bhai..and many more involved (Nira radia tapes)..so do you think is it possible to take action on these all ppls...(you never know if anybody from opposition BJP, left might also involved in it)...so, you will see this hulla-gulla for couples of weeks & then thing will get to normal...

    In a country, where you can not hang a terrorist (kasab), who killed hundreds of ppls & its recorded on Video cameras, then how come you get these ppls caught ONLY trhu telephonic conversations...

    Mark my words "NOTING GONNA Happen"...Kaddu katega aur sako batega..Congress will through some haddi to left & opposition & then all will lick that haddi together & you & me will see it in despair...

    Irrespective of what you said, one thing is clear:- Mango man will loose respect for all the names mentioned above. Now how many will trust what Barkha Dutt says on NDTV or Vir Sanghvi in HT?? Those people who don't like these journos will now ask to them that look what you have done first than asking us any Qs.

    As far as Mukesh Ambani is concerned, he is nothing short of white collar don. Even his new house, Antillia stands on wakf board land & he got the land for 21 Cr as against market rate of 150 Cr+.

    Here is why opposition will keep hammering this:-

    Most likely, there is noone involved in this scam, atleast when proof is concerned. They now get chance to hit PM, Sonia left, right & centre.

    In case of CWG, the CBI has arrested key Kallu aides like Lalit Bhanot today morning & this has made Kallu very tense, first hand report.

    When we talk about RE & builders, this scam is sufficient for builders to get loans by managing some people in bank. Some nice article has been written in IE on housing scam. Will post it here after I find it on net.

    * Both houses of Parliament have been adjourned today as well:D.
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  • Dehradun is safe.. Uttaranchal is been ruled by BJP after it has been formed (from UP). It is in a hilly region (Himalayas) and it is very very beautiful.
    Many of our Indian army officers and soldiers are from this region.


    Originally Posted by puser
    while its true that real estate rates in pune surpasses rates of many worldclass cities, dehradoon and pune are incomparable. each city has its own problems, i am sure some residents of dehardoon will find pune as better than their own city. in short gharki murgi daal barabar:bab (6):. BTW whats psft rate in deharadoon? How safe it is?
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  • Dont know what BJP ruling had to do with safety, i was asking from perspective of crimes and insurgency(maoism/naxalism etc) if any.
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  • ‘Property prices in big cities may fall'

    Nice article from IE:-

    http://www.indianexpress.com/news/property-prices-in-big-cities-may-fall/717389/1
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  • LIC Housing says $85m loans under scrutiny in scandal

    LIC Housing Finance said on Monday loans worth Rs 389 crore (USD 85 million) issued by it were under probe by the federal investigative bureau in a financial bribery scandal.

    The company said the outstanding loans under scrutiny by the Central Bureau of Investigation were performing and the value of securities against the loans were at over Rs 1000 crore.

    Eight executives from public and private-sector financial institutions have been arrested in the scandal, including the chief executive of LIC Housing Finance, who has since been removed from his post.

    Besides LIC Housing Finance Chief Executive R.R. Nair, those arrested include senior officials at state-run Central Bank of India, Punjab National Bank and Bank of India for allegedly accepting bribes for sanctioning loans.

    http://www.moneycontrol.com/news/business/lic-housing-says-3685m-loans-under-scrutinyscandal_502042.html
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  • No not those problems.. though Haridwar gets dirty during the melas.. Ganges is really polluted ..

    No it is a successful BJP ruled state.. not the typical problems..

    Originally Posted by puser
    Dont know what BJP ruling had to do with safety, i was asking from perspective of crimes and insurgency(maoism/naxalism etc) if any.
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  • Originally Posted by Sharpj
    No not those problems.. though Haridwar gets dirty during the melas.. Ganges is really polluted ..

    No it is a successful BJP ruled state.. not the typical problems..


    From your post it looks like success of the state of Uttaranchal is in being ruled by BJP :D:D
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  • I never said that.. it is generalization which I never implied.. They are doing good for the state and it will be a miracle for Congress to beat them there..
    BJP in Maharashtra was nothing to write home about
    They are a mess in Karnataka.. much better than gowdas.. but not upto the mark..



    Originally Posted by puser
    From your post it looks like success of the state of Uttaranchal is in being ruled by BJP :D:D
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